Discussion of Finance and Wall Street, and Dreaming of Pitchforks.

Category Archives: Credit and Credit Cards

It is difficult to talk about daily life without a sense of ourselves being the prey that Wall Street and the biggest corporations bred and held in captivity just like the rabbits of San Juan Island. The San Juan rabbits were originally introduced to the island for hunting, were at some point simply abandoned into the wild, and now have bred a little too successfully, which is a problem. They have few natural enemies other than Man, so Man seems justified in getting really nasty in its methods to get the little guys. I don’t want to dwell on those methods, because the sadness of rabbit death is a distraction from the other issues I should be focusing on.

Consumers as food.

We’re a rich nation. In order to participate in the social interaction present on the internet, interactive TV and movies, the viewer needs at least one of the expensive devices on which to watch, listen, post messages, click on opinion polls, vote for a favorite, etc. There are so many customers of new and wonderful products that the media treats these things as if everyone has them. Consumers thus are conditioned and bred to have heightened appetites for exciting goods and services. Even poor kids at Christmas want the best of computer games, XBox, Wii, MP3 players and the like, because they are well informed about such items and have been accustomed to think the average person should naturally have them — even when parents are unemployed or facing financial problems. That’s not the kids’ fault; it’s a rare child who fully grasps the financial circumstances of his family, and plenty of parents try to prevent their kids’ knowing how bad things are. The parents may go out begging from the public to try to meet their kids’ desires; generous people often help, by giving them some of those very expensive toys; the sad cycle continues. Those families are now being bred for the hunt. And that’s an extreme example. A lot of us are San Juan stock already, due to our wish to —

1. own a home and taking out too much credit, being deceived by our lenders, cheated by our lenders, or 2. own a smartphone, or3. own a computer tablet or one of the other wonderful devices which have now actually become a standard device for communicating, working, and the like. Yep, we’re rabbits on the run. Those devices alone, which we have learned to depend upon, incur more and more expense to keep running, to update, and so on. And don’t get me started about cable TV and how much it costs and how TV used to be free…

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And now, I want to say a word about a growing contagion:

The Big Banks have infected the supposedly “Good” Banks with their insidious fee practices. No bank is good anymore.

The HuffingtonPost and some other public-interest groups compiled a list of banks they considered relatively “good,” all over the nation. These banks had little or no exposure to the mortgage crisis, did not invest heavily in the biggest perpetrators of mortgage schemes, etc. The list included small and local banks in every state they could find, and the aim was to find safe and suitable places for middle class people to do their banking.Banks on this list are now participating in the egregious fees practices that the Big Banks do. For instance, at one unnamed bank, the new overdraft policies categorize consumer purchases in different ways, and by doing so, manage to charge fees on what the new federal legislation would otherwise prohibit charging a fee on.

The legislation says, generally, that each customer of the bank must be asked if he wants any purchase covered if it’s made without sufficient funds in the account. This is “opting in” to an overdraft — so if you try to use your check card in a store to buy an item, but your bank account doesn’t actually have enough, the purchase will go through but your bank will charge you a whopping fee, usually at least $25 and more often $35 or more. This overdraft protects you from inconvenience or embarrassment, but it’s terribly expensive.

If you do not tell your bank you want such protection, it will not cover the charge; your purchase simply gets declined, and nothing more happens. EXCEPT WHEN something more happens. Because they can categorize your purchases in different ways. Buying something in a store or online is considered a Point-of-Sale (POS) purchase, which requires your presence at the store, or your online confirmation of the purchase at the time it is being done. Well, there is another type of purchase, very, very common online: It’s the RecurringCharge. The subscription to an online magazine, or a dating membership, or movie service are all examples of this. This may be called something other than a POS charge by your bank, and they don’t have to decline, even when you didn’t opt in for overdrafts. They treat it as a special kind of purchase, as if it were a promissory note. Car payments and mortgage payments are often recurring charges and are important to cover. But a magazine subscription?? And it incurs fees when your account doesn’t have the money to cover it right there — Boy, does it incur fees.

Now, the fees. The bank in my example charges $36 for the first insufficient funds penalty. Then, if you don’t add some money to your account to take care of it, in a week you are charged another $36. Then soon, if you still haven’t covered it, you get charged $9 a day, every day you don’t add money to your account. A Netflix charge could cost you about $150 that month, if you forgot to make sure your account was completely funded.

Bonuses on Wall Street aren’t addressed specifically on webcomic Wigu.com, but the storyline of the site does follow a fantasy of mine about staging a revolution against the present order. There’s a little yellow guy in a red cape named Topato, who sails into the castle and tells the princess, “We’re overthrowing your father’s offensively incorrect idea of a democratic government, my lady. The rule of Law must be allowed to change with the times.”

Right out of my own fantasy mouth! And Topato’s friend, co-leader of the revolution Sheriff Pony, says: “Princess Dongle, by removing your father from power we will be on the path to an equal society. No longer shall a minuscule elite class prey mercilessly upon a lackadaisical, overmedicated working class.”

Then Topato says: “It’s revolution o’clock…”

I consider them both holy men.

I admit I overly enjoy several internet comics. Like Goats.com. According to Goats, when you do something impossible, like invert so you’re sucked into your own personal black hole, thus entering a different universe consisting only of yourself, what is left in this universe is: a Pop Tart. Either that or a kitten, since apparently they’re equivalent.

But in this world, as we’ve seen, the U.S. government intervenes when it feels like it. Otherwise, AIG would now exist as a Pop Tart. (Or kitten.)

And the lots of many car dealerships would be rustling and meowing with — kittens!

When we turn on TV, we’d get back-to-back-to-back commercials for toaster pastries during Bones and 30 Rock instead of ads for Jeeps, Fords, and other pieces of doomed metal.

When Barney Frank opens his mouth to tell us how he’s protecting us in the overseeing of the bailout money, out will fall — a kitten!

Tim Geithner, when he gets hungry during meetings, will have no worries, because his pockets will miraculously be full of Toaster Strudels. (Which will make him very sticky. If he seems reluctant to shake hands, you’ll understand why.)

Eric Cantor will open his box of Lipton teabags to hand some out to his friends but will find only crushed crumbs of strawberry-frosted toaster pastries, mixed with kitten hairs.

We are not speaking of simple moneylending, which Shylock engaged in. I never saw any proof that Shylock charged an unreasonable interest. He just had to find some sort of career out of the usual since he was a Jew and not allowed to own land.

We are referring to interest that is above and beyond what humans should be paying, charging usurious rates of interest on money lent. The notion of creating wealth for yourself from thin air this way disgusted our forefathers. They had respect for manual work, for craftsmanship, for farming, etc. They did not care, on the other hand, for people who found ways of getting the fruit of others’ labor through capitalizing.

Dante put Usurers in the same circle of Hell as sodomites and others who engaged in “unnatural practices.” Labor was “natural,” lending was not. The Roman Catholic Church considered it unearned income. So society was fairly prejudiced against lending to begin with; but as soon as economies began becoming more sophisticated (which happened in the Stone Age) it became a necesssary part of the whole. What was considered too high an interest to charge, then?

In past centuries, 10 percent often used to be a sort of cutoff. I don’t think it’s related to titheing. It’s just a number. For instance, British government in 1545 used to penalize lenders trying to charge more than that.

And today, ten percent seems to echo in many quarters, still, as an upper limit on consumer personal loans, but if you check laws for your state, they actually go all over the board. Some states don’t seem to even have a cap. And exceptions apply all over. Speaking of lending laws, why don’t credit cards fall under these laws completely? If the federal law states that a company may charge fees that are “legal” in the particular state the customer is in, how does it happen that I have the rates I do? Why are late payment penalties considered the same as interest and in what calculator does the penalty for a late $1 charge become $29 and still remain a legal percentage of the original charge? So a rate of 2900% is legal in my state? In any state??

Pardon. I seem to be foaming at the mouth.

Ah, Capital One. Ah, BOA, ah Wells Fargo. If only we were free to change the terms of our contract with you at any time, as you are. We would cut our rates by 5 percentage points; forgive ourselves for, say, 2 late payments per year; eliminate monthly or yearly membership fees and replace them with a single joining fee. That seems fair. And for your past practices, we grant ourselves the right to walk up to you in the street and slap you in the face once without legal repercussions, or key your cars once, or merely harmlessly spit on you each and every time we see you.

Now, that’s what I call a contract. And it’s social!

I wouldn’t feel so strongly if we were also able to earn similar interest in your banks when you use our money, you see. Why is it okay for banks and other lenders to charge these incredible percentages but no ordinary customer can get anything like that in any sort of savings instrument? Savings accounts, money market accounts yields have fallen to one-half, one, or perhaps two percent in most cases.

I am waiting to hear what happens with the bill Chris Dodd has gotten past committee in the Senate, which at least halts the hikes in rates on credit cards “at any time, for any reason” but feel sure that the CC companies will do what they can to FIND reasons.

Tomorrow among other things I might ponder the phone companies. The execs of those certainly get a lot of pay bonuses. And I will be annoying.

Wall Street Bonuses! Did you get yours yet? No? You must not work on Wall Street, then! You don’t matter in this world!

Down to business.

I have to confess that I descended into the bowels of the earth yesterday, and visited the BileMaster. And I drank some of the brew he makes. It’s awful; tastes like quinine mixed with Gatorade. But you find you can’t stop drinking it, so I had a lot. **

Afterwards, your vision is tinged sort of greeny-yellow with red streaks running down it. Or maybe those red streaks are just the blood running into my eyes from the gash on my head. I don’t know how I got that. I don’t really remember what I did most of the evening.

Today, I find I hate everything. Filth surrounds us. And everyone is a crook, I think. I look around and I see crooks on every side. Crooks, crooks, crooks….

I’m really sorry; I don’t usually talk like this. It’ll take another day or so to get back to normal, so I’ll just get this off my chest and out of my system while I’m waiting to recover my usual sweet self and sunny outlook. So read this, you bastard!

Again — I’m sorry. Hard to control myself.

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The President says it was “instant gratification” that fueled the bust of the economy? Not precisely. Instant gratification is to blame for the proliferation of the microwave, Tivo, millions of TV channels, and lots of other stuff like that. The growth of the economy is not equal to the bust of the economy. And that’s what the “culture” of instant gratification helped along: the growth. Not the bust.

It was people doing things that they found they could get away with, because the general public didn’t know about it. It was hidden, greedy crime. That’s what started the bust. Then it was the mismanagement of all the financial institutions dealing with the outcome of that hidden greediness.

No one in the past seemed to consider the big lack of savings accounts on the part of the middle class “the economy” — so let’s not call it that now. Our savings never really figured into things, at least in the last half-century. Only our spending did.

“The economy” still doesn’t care about us. But it will when we’re older, or broke, and out on the street. Then we finally become part of “the economy” because we’re so very visible. Big, out on the streets, demanding answers. Just like Godzilla.

The Duplicitous Products

Back in the early 90s, I thought that America’s main product that the world needed, or at least wanted, was military force and weapons. (Both our army itself, and our weapons manufacturing.) It seemed that the world’s use of us was to make us the police officer of the globe. Or so it seemed to me for about five minutes.

Now, the U.S. supplies the world with things it didn’t really ask for. Except maybe the bankers and finance guys. They would have wanted these things.

What are our products? The credit default swap. Wall Street bonuses as a pay system. The bundled, insured, diced-up bunch of toxic loans. The practice of demanding from customers multitudes of hidden fees that no one thought of charging for, until lately. Duplicitous products of finance and business!

Did you know that fully HALF of the people who received loans from companies like Countrywide, who ended up with Adjustable Rate Mortgages and subprime loans, actually qualified for prime rate loans? That’s fifty percent. That is NOT the poor being enabled to buy houses. That’s regular borrowers duped into signing stuff they didn’t know they were signing. They were conned into putting their names down for ballooning mortgage payments.

This is as good, or better, than the scams of the eighties, when banks were scammed by fake borrowers who took out big loans to flip real estate and other stuff, and eventually just walked off with the money. Of course the fake borrowers were usually also people from banking, who knew how to work the banking system.

This is as good as Enron. As good as manipulating the energy market of the largest state in the nation. As great as Wall Street bonuses. As good as the Bush election in 2000.

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If you don’t own a bunch of stock, WHY on earth do you worry how the stock market does? (And why are the news media trying to make it so important?) That’s like taking the temperature of your neighbor down the block to see if YOU have a fever or not.

WHY is the credit default swap still a legal transaction? Or is Wall Street simply a bookie operation? Is AIG one?

WHY hasn’t shorting stock been severely restricted already?

I suspect everything and everyone in business now. That’s what the stream of revelations of the machinations of the financial corporations has done to me. For instance, I turn on the TV, there’s this American Idol show running over its time into the next hour. I wonder why — because that never happens. TV ad time is so expensive.

It was planned, I think. A little gimmick that made some sneaky people money in a new way. In the ten minutes of that show overlap, sensation/surprise Adam Lambert sang so prettily. He was:

1) Seen by a whole lot of people who never ordinarily watch American Idol. These accidental viewers were waiting for the show Fringe, which has a very different audience.

2) Missed by the regular viewers of Idol who DVR’d the episode, who probably set their recording devices to correspond with the normal time of the show. They missed the overrun of 10 minutes.

3) Yanked off Youtube.com, which in the first few hours afterwards, showed that video of the last 10 minutes. Now it does not, and people are rabidly searching for it. (He was that interesting, yes.)

4) Sold hugely on iTunes. That 10-minute performance from TV (trimmed down) is now for sale there. The planners managed to keep it exclusive by making it run past its time.

Just an interesting little experiment that was probably very successful.

But the bigger arena of business artistry is elsewhere: the fees that credit card companies, banks, cell phone companies, and other companies have found they could charge us. More examples of American creativity!

It’s hard to list all those newfangled fees that have cropped up in the last year or two. We’ll post a short list of some examples soon. And you’ll soon be noticing those and zillions more, every time you open your eyes. Or your mail.

**The BileMaster evidently sold a batch of his brew to Kenya once. http://news.bbc.co.uk/2/hi/africa/1025120.stm And Alan Turing (father of the Turing Machine) may have eaten an apple dipped in it. It’s bad stuff.